[miningmx.com] — AQUARIUS Platinum CEO Stuart Murray has finally pulled off the deal he has been chasing for years, which is to get ownership of the southern portion of the Booysendal deposit in Mpumalanga.
The driving motivation is that Aquarius’ operating Everest mine sits adjacent this ground and can access it directly and at low cost by extending its existing underground infrastructure.
The acquisition is a “game changer’ for Aquarius because it deals with the major question mark that many analysts have put over the company’s future, which is its apparent lack of medium and long-term economic life.
Booysendal South contains some 31.1m oz of platinum group metals (pgm) which will increase Aquarius’ current resource base by about 24%.
Murray told Miningmx, “I am very pleased to have finally done this deal. I have always said that, eventually, a sensible deal on commercial terms would be done by Aquarius over Booysendal South.
“It’s a pity that we have had to wait for years until Northam Platinum had clear, unfettered ownership of the property and was in a position to conclude a deal with us.’
Aquarius is paying R1.2bn – net of taxes – for Booysendal South which it will fund from existing cash resources and future cash flow generated from operations.
Murray said the acquisition of Booysendal South would extend the life of the Everest mine from the current eight years to more than 30 years and would also allow a small increase in production. He said details of the increase in production were still to be finalised.
“We could start mining towards the Booysendal boundary at a faster rate by increasing production from Everest. Developing into Booysendal itself will probably cost around $100m spent over a few years which is cheap compared with the cost of starting a conventional new platinum mine.”
Murray said the deal was a good one for both Aquarius and Northam and agreed it was a “game changer” for Aquarius, although he was critical of the prevalent view in the market that his group had limited life.
“Those analysts simply do not understand our business. They look at lines on the map and conclude that in ten years or so our Kroondal and Marikana mines will have to shut down because they will run out of reserves.
“The point is that those platinum ore bodies extend beyond our present boundaries and we own the best points of access to the next incremental ounces.
“The logical outcome is that the existing pool and share JV agreements will be extended through sensible, commercial agreements with our neighbours as and when it is necessary to do so.”
Murray pointed out that Booysensal South plus the recent Afarak transaction the group had done potentially increased Aquarius’ resource base by nearly 50%.
Northam acquired Booysendal through an empowerment transaction with Anglo Platinum. It began construction last year of a mine in the northern portion of Booysendal which will start production in January 2013 and reach full output of 160,000oz of pgm annually by February 2014.
Northam CEO Glyn Lewis said the deal with Aquarius would permit Northam to realise value from Booysendal much sooner than what otherwise would have been the case.
He commented, “the proceeds of the transaction will be applied to the Booysendal North UG2 mine which is currently under construction.
“The amount of R1.2bn plus cash on hand of R650m derived from the acquisition of Mvelaphanda Resources; funds on hand and future earnings will contribute significantly to bringing the Booysendal North mine into production as expeditiously as possible.”
Lewis said there was a separate agreement between Northam and Aquarius in terms of which Aquarius would help Northam through access to various infrastructural services from the Everest mine including power, water, road access and tailings disposal facilities.
The Booysendal transaction is subject to a number of conditions precedent of which the most important is probably Section 102 approval in terms of the Mineral and Petroleum Resources Development Act to amend the Everest and Booysendal converted mining rights.
Aquarius shares rose 6% to R39 and Northam shares were 2% higher at R44.23 in trading on the JSE on Wednesday morning following the announcement of the Booysendal deal.
– The writer owns shares in Aquarius.
